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Inference tests for tax progressivity and income redistribution: the Suits approach

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Abstract

The Suits index is often used in tax policy analysis to measure progressivity and to detect changes in progressivity over time and between different fiscal policies. The lack of attention that has been devoted to the inference issue to date is surprising. In this paper, the limiting distribution of the Suits index estimator is derived and simple plug-in formulae for the index estimator and its sampling variance are provided. By means of a simulation analysis, we show that inferences based on first-order asymptotics perform well for moderately large samples. Bootstrap-t – which uses the plug-in variance estimator – appears to perform well. The accuracy of the proposed inference tests is also illustrated by means of an empirical application that uses Spanish income tax data.

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Authors and Affiliations

  1. Department of Statistics, Econometrics and Spanish Economy Faculty of Economics, University of Barcelona, Diagonal 690, Barcelona, 08034, Spain

    Jordi Arcarons & Samuel Calonge

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  1. Jordi Arcarons
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  2. Samuel Calonge
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Correspondence to Samuel Calonge.

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Arcarons, J., Calonge, S. Inference tests for tax progressivity and income redistribution: the Suits approach. J Econ Inequal 13, 207–223 (2015). https://doi.org/10.1007/s10888-014-9280-0

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  • DOI: https://doi.org/10.1007/s10888-014-9280-0

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